Congress holds strongest power of influence

June 30, 2010

Freedom New Mexico

Congressional Democrats and their minions are applauding the financial oversight bill that was hammered out on Friday. President Obama and his leaders in Congress say the compromise bill should be ready for the president’s signature before the Independence Day break.

There is plenty of cause for worry in the bill. It places unprecedented control of financial institutions in a newly created bureaucracy within the Federal Reserve. The Consumer Financial Protection Bureau, as it will be called, will have the power to impose regulations on financial institutions without public input.

Some people welcome such control, which proponents say will limit fees imposed on banking transactions and credit card use. It’s worth noting, however, that the bill also requires large banks to pay kickbacks to the federal government, which will make such fees more likely, if not necessary. Government, not the market, will now exert more control over interest rates and other costs of doing business.

The bill also thrusts the government further into the private mortgage lending business.

The agency will oversee mortgage lenders, much like it did for Fannie Mae and Freddie Mac, the woefully mismanaged tax-funded lenders that contributed greatly to the housing and foreclosure crisis of the past few years. The new legislation excludes those two agencies, of course, since the government now has complete control over them and routinely exempts itself from the rules it places on the rest of Americans.

Generally, though, people will find it harder to shop around for a lender that offers better deals, since they all will operate under greater government control.

We should keep in mind, however, that such oversight shouldn’t be necessary, and it wouldn’t be, if people recognized that they hold the greatest power — not bankers and not government.

People unhappy with fees that banks and credit card companies impose on transactions can do more than complain. They can show their opposition by not making those transactions, and even switching to institutions that don’t impose such fees. More assertive acts by consumers would let these institutions know that friendlier policies would pay off in new business, and put downward pressure on such fees, as the companies try to undercut each other in order to gain more business.

The bill applies only to banks that carry more than $1 billion in assets. People who place their money in smaller community institutions might not see immediate change. But those smaller banks might change their policies in order to keep people from withdrawing their money and taking it to a large national bank with federally regulated fees.

As in all aspects of our lives, it is best to inform oneself of all options and consequences before making major decisions. Unfortunately, this financial regulation bill is one more case in which the government is restricting our freedom to make such decisions and negotiate deals that are best for us as individuals.

Of course, that could be corrected if more people exercised the greatest power of all: expressing their displeasure at heavy-handed government by voting out its proponents, and replacing them with candidates who pledge to place control of our lives back where it belongs — in our own hands.